Demand and price situation

Historic, Archive Document

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SIT UATION

BUREAU OF AGRICULTURAL ECONOMICS
UNITED STATES DEPARTMENT OF AGRICULTURE

WASHINGTON, D. C.

JUNE I9^6

EXPORTS AND IM PORTS, U N ITED STATES MONTHLY AVERAGE BY YEARS,
1935-44, AND BY MONTHS, JANUARY 1945 -MARCH 1946

DOLLARS
(MILLIONS)

1,200

1,000

800

600

400

200

1935

1941

1938

MO

NTHLY AVER/s

RY YFAR<?

D T T C M lA O

^GE

^ /

—

^^^^

>

1 1

1 1

1 1

BY MONTHS

'^s^^-xpo/'/s excluding
lend lease

I I I I I I I I I I I

_LJ Lj L

JAN

JULY
1945

JAN JULY
1946

SOURCE: U. S. DEPARTMENT OF COMMERCE

U. S. DEPARTMENT OF AGRICULTURE

NEG.460I5 BUREAU OF AGRICULTURAL ECONOMICS

The value of both exports and imports rose during World War II. Lend-lease
accounted for most of the huge increase in exports, while the shortage of shipping &
the cutting off of sources of supply acted as brakes on imports. Reduced needs for war
material after V-E day and then the termination of lend-lease following V-J day brought
sharp declines in exports. Acute foreign needs for food, clothing and industrial goods
have caused exports to rise in recent months. Some exports labeled lend-lease are still
occurring. These are goods which were contracted for prior to termination of -lend-lease
but are essentially commercial exports in that they are being paid for in cash or are
being financed by Export- Import Banl< loans.

2 =

SCONOMIG AF^QTim AaRICULTUBS

sUnit org I3k5
Item 8 "baae glear ^

Imduntrial .Production 1/ 819:35-398

"X'O'fe QJL ooooooooooooooocooopoooO 2S 3L00 8

All manufactures o o o o o o o o o o o « s 8
2>iimTjl6 goods ooooooooooocoooS 8
NoMurable goods oo°°ocooooao8 " s
Mineral

Conetfuction activity ij §193?>^398
ContractSo total o o c <= o o » » » o o o § - 100 8
CoatractSo residential 0000008 8

Wholesale prices 2/ 81935== 39°

All commodities 000000=0000008 100 8
All ©^mmodities exisept faxm s 8
and food 0000000000000000008 ^ 8
Fasitt products 0000000000000008 ^ 8

5*00(1 0000000000000000 c. OOOOOOOC 8

received and paid "by 81910-1^8
farmers j/ '8 Z XOO §

Pg'lces reeeivedp all prodo 0008 §
Psfiees paidj, into andtaxesooS 8
Parity rat iOo 000000000000,10008 ™ 8
©©asumers" price ^ 6/ i^l935°39§
fotal 0000000000000000.0000008 s 100 S

o DO 0

OOOOOoooooOooooooooooooO" O
OOCJoooooooooooocoooooS 0

ln&@m<& 81935=398
loEsigri cultural payments ^00 8 s lOO 8

w»OAJL J. tX&SU J/ OOOOOOOOOOOOOOOOO O

Income of Industrial Workers j/o 8 8

000000000000

203

233

160

152

168

163

2kl

163

154

173

174

21k

336

166

138

182

187

166

17^

161

166

166

161+

137

li«)

l^H

1^1

137

103

JLOO

C.JI

Sk

150

233

316

380

131

131

133

134

135

137

123

122

12^

125

126

127

169

170

171

172

176

178

136

136

138

ll^O

202

203

206

207

209

212

1?^

173

17?

17s

180

181

116

117

116

116

116

117

12g

127

130

130

131

139

137

141

1^

140

142

123

122

124

izk

125

125

236

238

229

226

230

230

283

296

281

305

285

273

2S6

323

235

2iq

239

2kk

30?

355

2kk

224

2kfi

265

sekly earnings of faetory sDollarai
workers ^ [
All manufacturingooo 0000000 00 8 8 W^o^l l+7ol2 J+lol5 il0o55 kZolk U2o3S

goods 0000000000000008 ™ 8 49oOT 52o90 43067 k2okS kkol2 kkolZ

0000000000008 ™ 8 380 30 3S08O 380 75 39o03 39oS7 UO0I7

8 s

®®t®^ .(Civilian X/ 00000000000 sniliijnt. 5I06 51o2 51o4 51o7 53oO 5^06

lmpl@ws in nonagrio esto ^8 'Shouso 83609SI 3?o?91 35o818 35o360 36^271 36o721

Farm ^ 000000000000000000000 8 ^ § 9o844 8o982 7o?32 7^799 80263 9(,m
©weranent finance (Federal) |/o8Milodol8

Iseeiptso netoooooooooooooooo8 ™ 8 3o837 2o929 3d 819 3o678 ^Jkl 2,Gjl

lxp®aditures o o o o „ o o o o o 0 o „ „ „ o § ^ 8 J.^kS J^^S %8S1 3^510 4o602 4^251

-"^sesB 1/ Federal Eeserve Boardg converted to a 1935-39 feaseo 2/ Uo So Depto
of Ita'borp Bo Lo So j/ Uo So Depto of Agriculture^ loAdo To convert prices re=>
(seived and prices paid^ interest and taxes to the 1935-39 "baseo multiply by
o93llO and o78125 respecti^elyo k/ Uo So Depto of C©mmorceo Uo So Depto of
Imh&T.j BoLoSo 6/ Con8\imera" priee index for moderate^income families in large
eitieso j/ UoSo Depto of ©©nuaerceo B\ireau of Gensuso §/ Uo So Depto of Treasury o
Data for 1944 are on average monthly "basiso

JTJNE 1946

- 3 -

THE DEMAND AND PRICE SITUATION

Approved by Outlook and Situation Board - Juno 31, 1946

Domand for Farm Products •••

Tho Labor Forco

Commodity Prices
Farm Ir.coi^o

Livestock and Moats •

Dairy Products ••«••«•••. .e*

Poultry and Eg/^s

Fats, Oils and Oilseeds ••••

0 N T

E N T S

Pago .

Pacco

3 !

5 .

6 <

7

7

8
8

! Tobacco ••»•••••••••>••••••*

. 13

, Recent Dovolopmonts in U. S.

DEHLiND FOR FAPJvI PRODUCTS
The demo.nd for farm produc-f:s continues o.t a high level. Tho flow of
income to individuals has been woll maintained despite tho seyore setback to
industrial production imposed by work stoppages in coal and rail transporta-
tion. As tho effects of recent strikes vfear off, it is expected that indus-
trial production vfill climb to a new peacetime high provided further large-
scale stoppages are avoided.

The Federal Reserve Bopo:'d index of industrial prod\iction declined from 168
in Ivlarbh (1935-59 = lOO) to 164 in April and is estimated at about 160 for May.
This index stood at 225 in May last year when produchion of war goods accoimted '
for about two-thirds pf the total. Thus a large part of the gain in industrial
output which occurred, in March follov/ing settlement of the steel strike has been
cannollei. As a result of the coal tie-up, stool production, vjhich had re-
covered to almost 90 percent of capacity in late March, fell belovr 50
percent in tho latter half of May# Reduced coal and steel supplies checked
the production of automobiles and many other durables in May. As a

result, tho tino v.kcn j_.r'':> "v.ction of Qood.z will be adoqur.to to neot procont

JOTE 1946 - 4 -

requirements is appreciably further a\vay# Following the settlement of tho coal
and rail tranaportation strikes^ improvement. 4. n industrial production has been
noted and a substantial increase in tho index -is anticipated for Junet By the
end of the year^ the index of industrial production may advance almost 20 per-
cent oyer the May level* '

. Income payments during Api'il at an annual rate of almost 157 billion
dollars -woro^pnly slightly .be low the revised estimate • for -Inarch of 158 billion" .
dollars and loss. than 4 percent below tho April 1945 estimate* • For the first
four months of ,^§46, .iijovoiriq payments o.voragod only 4 .percent bolow tho record
level for the c.omparable .4 month period in 1945 and .133 percent above the
1935-39 annual average^ , .Higher wages and increased employment have tended to
maintain labor income despite losses ijj.currod in. vrork stoppages. No signifi-
cant change in the levol of income payments occurred in May. Retail sales
continued at boon levels »

■ ' Building and construction contracts av/arded in April were more than twice
as high as in April lact year and have novj- attained a level comparable to the
peak year of 192G, Residential building contracts awarded in April were seven
timos the level of a year ago* It is anticipated that further narked expansion
in construction aot5.vity mil occur dospite shortages of i.ntorials o.nd labor*

THE LABOR FORCE

According to the Census report covering the v/eek of May 5-11, 1946,
total civilian employment rose from 54,550,000 in early April to 55,320,000 in
early Ifeiy, largely as a result of the usual seasonal increase in agricultural
employment t During the same period tho total civilian labor force increased
from 56,900^, 000 to 57,630,000, As a result, unemplo^rmont in May was aliaost
the same as in the previous month, 2,310,000 in May compared with 2,350,000
in April,

jmiE-1946

- 5 -

With demobilization npproximtely four-fifths comploted, further ex-
pansion in tiio civilian labor foroc ir: Ij.kr/ly to be iaodcrate, after allowanoo .
for the usual summer Ijiflux of Btudcntr into the J.abol^ force. It is ojcpcctod
that these accessions to the labor force will be -^bsnjlbod iidthout difficulty.
Expanding productior may result in a.•^•i^^;ht labor market by th:) end of the year.

In early May, there were 2,010,000 per^^ons absent from work because of
strikes, illness, bad weather, or vacations, a figure slightly below April,
There wore about 850,000 veterans who hud not yet b. f;-u.n to look for W(jrk, and
are not counted in the labor force, a reduction of about 250,000 from tlic pro-
idous month*

COMMODITY PRICES

The broad advance in commodity prj.cos evident since the beginning of
the year continued throughout April and May, Pressures on the prico structure
have in no way been weakened. Those pressures arise from inadequate produc-
tion relative to demand, high-levul incom.os, and generally increased costs in
prospact from recent v/ago-rate and ccili?';g-prico in8rea;;03. The trend con-
tinues upward, r.'lth the rxtnnt ^f the advance in the near future dependi.ng in
considerable degree on price-control policy after mid-yenr.

The Bureau of Labor Statistics ind.ex of xvholesalo prices advanced from
108,9 in March (1926 Z lOO) to 110.2 in April, an i.ncrcase of approximately
the dame magnitude ae occtirred in the precedin.;-, month. Since January, the
wholesale price index has risen about 3 percent, reaching a level 4 percent
above -^pril 1945 and 37 percent above the 1935-39 annual average.

The index of prices received by fari.urc: declined sxi.ghtly during the
month ending May 15, from 212 to 211 (1909-14 ' lOO) principally as a result
of a sharp decline i:'-; trvick-crop prices. Prices cf grains vrere substantially
higher reflecting partial adjustmf^nt- to higher ceiling prices. Most other
farm products shcv/od moderat'o price .'ncreases. The ;ia'.Iox of crop prices in
May was 215 percent of the 1909-14 ?\'erage, 5 points lov.-er than in April but
17 points above May 15, 1945. The iiMex of prices of livestock and livestock
products advanced 2 points to 207, fiv-. points higher thian a year ago.

A substantial increase i.n tha prices received index to a new post ..rar \
high is anticipated for Junr reflecting principally adjustment tn the nem \
ceilings for dairy products and fv.ll adjustment to the higher grain ceilings
established in mid -May,

TliO index of-'prices paid by farmers including iu-l-erc-t and taxes
(1910-14 = 100) advanced to 184 on May 15, This x,ar. a o point rise from a
month earlier, tho sharpest incrwose in almost 5 years. Since January, this
index has risen 4 percciit. -^s a result of this very :->ub.-, tantial rise in the

JTJXE - 1946 - 6 -

index of prices paid, intcroct end tares, and the- slight decline in prices of
farm products, the parity ratio declined from ?,17 on April 15 to 115 on M^y
15 compared vdth 116 .a year ago. However, it is anticipated that the ratio
vdll be higher in June resulting from a greater advance in farm product prices
than in the prices paid hy farn.'.rs.

The index of pri.ces paid by farriiurs for commodities (excluaing interest
and taxes) on "ivL^y 15 wns 192 or 4 points above a jrionth earlier. This index
had increased 4 percent 5:nce Jr.nur.ry and 7;■^3 7 percent above a year ago.
Most of the incri-asc in tli.- p'.st month was regist^^red in the price irdex of
comm.oditics used in production, r. fleeting liighor ceilings for feeds and other
commoditidrs.

FAPM INCOME

Cash receipts from farm marketin^u during the first 6 months of 1946
arc nov.'- expected to equal or exceed the tefe l of I*, 710 million dollars received
in the same period la.;;t year. Receipts during the first quarter of 1946 were
slightly lower than a year uarlior; but this decline is being offset in the i
second quarter. First-half totals for both crops and livestock are expected ■
to be close to last year's levels. Relatively heavy m.arke bings of moat animals
in recent months, espcoinlly of hogs, b':'.ve maintained total receipts from
livestock and products at the 1945 level. In the cast; of crops, incroased
receipts from groin m.arkotings in th.; s jcond quarter of the year have brought
total receipts up near last ye.;ir's level. Premium paymertts on v,heat and corn, i
•larger marketings as a result the emergency grain-purchase program, and .|
increases in the ceiling prices for nirst grains haA^-c all cortributcd to the i
increase in cash rriceipts fr ,m. grains during the sccend quarter, j

F'armers rec^dv^^d almost 1,400 million dollars • frr>m marketings in April, j
This was a little more tho.n in March, but not auite so much as iri April 1945,
Livestock reacipts shov/cd somewhat more than the usual i-ear.onal gain, reflectingj
heavier marketings of hogs, cattle, and cal-vcs. But crop receipts in April wcrct
down from last ye^r. This \/as partly a result of delays in the m.arketi.ng of ]
r/huat and corn ^^hile the Em.ergency P'lrchaso Program, was being vrorked out and :i
partly because some farm.ers #10 sold wheat did not cash their certificates at 1
that timc^ Current montlily estimates of total cash receipts will include re- i
ccipts from tlic sale of v;heat under the emergency progr-.m '^nly as the c^^rtif- i
icates are cashed.

Total cash receipts in I'iay v/ere probaMy about 10 percent larg>..r thr.n in
April, A 20 percent incr^ease in crop receipts r^-sulted largely from heavy mar- j
kc tings of wheat ;\:\6 corn at higher prices rnl added premdiims. Cash receipts m
from livestock and products in I'/ay -.ver., only slightly highor than in April as a |
result of seasonal increases for dairy a:id poultry products.

In June, both crop and livestock recoipts are expected to total .about
the same as in May, Scas'-n .l increases in receipts fr::.m fruits and vegetables
are likely to offset a d>.-clire in grain receipts fr.-m chk.ir high level in May,
Total receipts from livestocl: ;ind products '-ill prob;'bly be maintained fairly
v/ell as a result of further scason.il increases for d.;iry products.

JUHE 19^+6

~ 7 -

. LIVESTOCK MB VIE^S

Meat-animal prices have continued to rise steadily since early v/inter
and prices in June generally were the highest since August 1919« High con-
sumer incomes indicate a strong demand for meat through the first half of 19^7*
Total meat production in 19^7 may "be a hillion pounds less than the 22.6 "billior
pounds, dressed meat hasis, novi forecast for 19^+6.

Total meat production through May was close to the level of a year ear-
lier, despite a material decline in the numher of cattle and calves slaughtered'
under Federal inspection. C?ttle and calf slaughter in non-f ederally inspected
plants was a record in the first h months of 19^S, off sett j.ng most bf the re-
duction in federally inspected slaughter. Total ca-ttle marketings for slc;.ugh-
ter have fallen off sharply in recent weeks, reflecting uncertainty as to re-
moval of price controls. As cattle numhers arc only moderately helow a year
earlier, slaughter of grass cattle in the second hrlf of this year promises to
he large. Since April, lamb slaughter has hecn materially helow levels of a
yea.r ago and will continue hclov; last year hccause of the smaller niimhcr of
lamhs raised this yea.ro

Hog slaughter prohahly will continue larger than a year earlier through
the remainder of 19^6. Hogs from the I9U6 spring gig crop prohahly v;ill he
marketed earlier this year than those from the 19^5 spring crop, reflecting
less favorahle hog-feed price relationships thaji v. year ago. Short supplies
of feed concentrates ajid higher feed prices together with this year's lower
production goal will result in a smaller 19^6 fall pig crop than the 35 million
of I9I15,

Early marketings of 19^6 spring pigs and reductions in the fall pig crop
this year vdll he reflected in lower pork output hcginning in early 19^7 •
Unless the spread between feeder and fed ca.ttlc prices vridens this summer and
fall and unless feed-grain production is large this year, the numhcr of cattle
fed for market during the winter and spring will he less than in 19^6,, The
lamh crop prohahly will he smaller next yoa,r, which will he reflected in a
further reduction in lamh and, mutt on output,

EAIEY PRODUCTS

Prices of dairy products were heing adjusted upward during June as a
result of the dairy price program announced hy the Office of Economic Stahiliza«i»
tion on May 29o Retail prices of fluid milk were increased one cent per quart
in most markets of the nation during .the first week of Juno. Price increases
at wholesale were 10 cents per pound on huttcr, 35 cents per case on evaporated
nilk and 5 cents per pound on cheese* These increases are sufficient to enahle
processors to pay farmers producing milk for these dairy items around kO cents
more per hundred pounds for milk and ahput 12 to I3 cents more per pound for
hutterfat. Compared ■'fdth returns to farmers ( ind.Tiri i.-ng production "Da^rmciits) in
mid»Junc 19^5» thcGO increases would 00 equivalent to 12 percent for milk at
wholesale and 17 percent for huttcrfatc Costs of dairy rations in mid^May this
year were I7 percent higher than in mid-June of I9U5.

The dema.nd for milk for fluid u^cs at prevailing ceiling prices has heen
almost fully sa.ticficd in the past few weeks, hut total demands for ma.nuf actured
products have continued to exceed availahle supplies. Outlets for direct fluid
uses and for ice cream havo continued to ahsorh a larger proportion of the near-
record total farm milk production than last year, leaving smaller qU3.ntities

JUl-IE 1946

for nanuf actured itens, particularly bitter, evap .rtated nilk and cheese. Ice
creaa production in the first quarter of 1946 v/as 95 percent larger than in tho
corresponding period of last year, but total consunption of fluid nilk and crean
ivas up only slightly over a year earlier » Production of "butter in the first
four nonths of this year was sraller than a year earlier by 28 percent; evapo-
rated nilk by 27 percent and total cheese by 9 percent e

With excellent over-all pasture conditions, nilk production per ooxr has
continued to average above tho previous record of a year earlier e Feeding rates
were still above average but had declined nore than seasonally. Total output of
nilk in Lfciy v\ras 1»2 percent snaller than in May last year and the total for the
first 5 nonths vra.s dovm 2 percent fron tho record for that period reached in 1945,
reflecting a snaller nunbcr of nilk co-wb* .

POULTRY AND EGGS

Egg prices nay average slightly bolov; a yoar earlier during tho last six
nonths of 1946, Civilian supplies will bo at least as largo as last year, since
near-record cold-storage holdings of shell and frozen oggs will offset any likoly
decline in farn productionc

The inoroaso in feed prices during I.'b.y reduced the egg-feed price ratio
to 6 percent belov;" the average for 1935-44 and 16 percent below nid-May 1945* This
less favorable price relationship together mth v/idespread difficulties in obtain-
ing feed has resulted in heavy early culling of laying flocks and a sharp reduction
in hatchings. The nui'iber of young chickcr;s on fams Juno 1 v»ras 7 percent snallor
than a year oarlioro Tho. nuch snallor hatch of chicks after Juno 1 this year \7ill
result in tho final figure, for 1946 being rcducod further than is indicated by
the Juno 1 reduction in nifr.ibors on farns*

Prices received by farners for poultry neat in the second half of 1946
probably will average about as high as in the second half of 1945, Output of
chicken and turkey in the second six nonths of this year v/ill be signif icalnbly
belovf the second ho.lf of 1945, but the large carry-over of cold-storage stocks
will leave alnost as nuch poultry neat available as in the correspodding period
of last year© Sales of chickens by farners probably will be conplotod earlier
than last year since hatchings vj-cro earlier than in 1945 and birds nay be sold at
lighter vroights,

FATS, OILS, M OILSEEDS

Recent developments point to a. decline in donestic output of fats and
oils in 1947e The total probably v/ill be less than 9 billion pounds conparefS
Vidth the wartine peak of 10,8 billion pounds reached in 1943 and 1944, an'
output of 9,4 billion pounds in 1945, a^ad. an expected production of about 9«2
billion ipounds in 1946, Livestock-feed price relationships are now distinctly
unfavorable to feeders, particularly of hogs and cattle, as 0. result of the
sharp increases in prices of feed grains and oilseed ncals in early Mayo Lard
production may doolino 10 te 15 poroont in 1947, and output of tdllow and greases
may be down 5 to 10 percent* The soybean-corn and f laxscod-whoat price ratios
under the now ceilings for corn and wheat are considerably bolov: tho average
fertile war years** Although reports on acrecxge are not yet available, both
soybean and flaxseed production are likely to bo smaller in 1946 than in 1945»
This will be refloctod largely in reduced oil output in 1947»

Supplies of fats aiid oils for civilian use in 19*46 probably will total
noderately less, per person, than in 19^5* If q.uotas on manufacturers' use
of fats and oils for civilian use renain at present levels, the reductions
in food and soap use- will, nore than offset an inci'^ease in use in paints^ var-
nishes, floor coverings, and .oilcloth. Production and inports of fats and
oils will "be noderately smaller this year than in 19^5* v;hile exports will be
maintained at a high level in relation to pre\ira.r<. Stocks of fats and oils at
the beginning of 19^6 were nearly million pounds (20 percent; smaller than
a year earlier. These factors more than offset a drastic reduction this year
in procurement of fats and oils by the armed services.

Prices of fats and oils renain at ceilings, factory and warehouse
stocks of fats and oils on May 1, totaling 1,60S million pounds, crude basis,
were the smallest recorded since 193^» when output was curtailed by drought,

COEIT AND OTHER TEED

Demand for feed grains and byproduct feeds is expected to continue
strong during the next few months even with abundant green feed available in
nearly all sections of the country. The recent sharp increase in ceiling
prices of feed, which caused relatively unfavorable livestock-feed price re-
lationships, apparently did not result in any immediate lessening in the corr-
mercial denajad for feed. Livestock feed requirements during the last half of
19^6 probably will be smaller than during the last half of 19^5 ^-s a result
of lighter concentrate feeding of most livestock and of decreases in numbers
of livestock, particularly chickens.

Commercial, supplies of corn, which have been small relative to demand
for several months, probably will continue small at least until nevi'-^crop corn
bee ones available in volume next fall, -Market supplies of barley are likely
to be relatively small during most of the 19^6-^7 crop yearo Market supplies
of oats, on the other hand, probably will be relatively large during most of
the ISkS-kj seasons

The" current strong demand for feed grains and byproduct' feeds is sup=-
porting prices at the higher ceilings which became effective May 13»

s

The season to mid-June was mostly favorable for feed crops, except in
the Southwest, and given average or better growing conditions during the
summer, fairly large feed-grain and hay supplies nay be expected for the 19^6-
hj feeding season. On June 1, progress of corn planting was at least average
in the Corn Belt and the country as a whole. The second largest oats crop of
record is in prospect for this year; the June 1 forecast of nearly 1,^93
million bushels of oats is only 3 percent below the record crop harvested in
■19^5» Ho\;rever, barley production during 19^6, indicated on June 1 at 23I
million bushels, would be the smallest since I937,

WHEA.T

With prospective export demand' very large again in 19^6-^7* wheat
prices are expected to continue at ceiling levels. It is the intent of the
Department of Agriculture to export 250 million bushels during the 19^+6-^7
marketing year, on the basis of a prodUctfon of one billion bushelso VJheat
production prospects 'in most importing countries are indicated to be better
than last year, but world wheat inports will continue large through 19U6~^7»

JUNE ISUS

- 10

In order to reduce donestic use of wheat and thereby increase the
quantity availaMe for export, ^1 controls now in effect will he continued
in 19^6 either as they are or in modified forn. In order to expedite the
delivery of the wheat for export ^ an anendnent to War Food Order 1^, effec-
tive May 2hf requires that (l) Producers, in 26 important wheat States shall
sell at least half of the milling wheat (wheat grading Ho* 3 hetter, or
grading i^- or 5 011 test weight) delivered to country, subterninal, or terminal
elevators, or merchandisers, millers or other processors (wheat delivered for
the account of the CCC is excepted); (2) Such receivers shall set aside for
delivery to the 000 not less than one-half of the milling wheat purchased from
producers. On the other hand, the amendment also provides for an increase in
the quantity of wheat v;hich may he used hy millers, effective July 1, to S5
percent of the 19^5 monthly average, as compared with a 75 percent provision
in the period from April 1 to June 3O, This change together vjith greater
availability of wheat will result in a substantial increase in domestic use,
compared with recent weeks, especially for mills that have been unable to ob-
tain enough wheat to grind up to their 75 percent level. However, the total
for domestic flour in the 1946-^4-7 year is expected to be the lowest in more
than a quarter of a century. As a result of the higher extraction rate, the
decline in flour consumption will not be so large as indicated by the reduction
in the quantity of wheat processed.

Since May 2^, the CCC has been paying ceiling prices for nev^*crop
wheat bought as part of the 250 million bushels to be acquired under the set-
aside purchase program.^ The export goal of 25O million bushels was based on
a very tentative estimate of domestic utilization. Included in the total
estimate in million bushels (estimates for 19^5*"46 in parentheses) are: Pood
^50 (^9!+), feed 150 (32g), seed S2 (g2), and industrial use 2 (21). On the
basis of a bill ion- bushel crop, this would permit an increase in carry-ovr
on July 1, 19^7 of more than 60 million bushels. The carry-over of old wheat
on July 1, 19^6 is expected to be about 100 million bushels — the lowest
since the S3 million in 1937»

Mieat production this year as indicated on June 1^ will be 1,033 nil-
lion bushels consisting of SO9 million bushels of winter wheat and 22k million
of spring wheat. A production of this size v/ould" be our fourth billion- In shel
crop, . ,

FEUIT

Continued high prices for fruit in general are in prospect this summer.
Consumer demand for fresh and processed fruits remains strong, and processor
demand for fruit is expected to provide keen competition for available suxjplioci
Supplies of 19H6-crop deciduous fruits will be slightly larger this summer
than last but those of citrus will be somewhat smaller. Stocks of canned
deciduous fruits at the beginning of the 19^6~U7 packing season are the small-
est in several years,

prices for oranges and grapefnait are expected to continue at ceilings
for the preferred grades and sizes, v/hile prices, for lemons, which have been
considerably below ceilings all winter and spring, probably will approach ceil-
ing levels. Supplies of orajnges will be considerably smaller this summer than
last but still up to the average of recent years. Lemon supplies will be
slightly smaller than the above average supplies last summer, and those of
grapefruit will be about the same as last summer although seasonally small.

- 11 «

The season for fresh peaches „ cherries^ apricots, and pluns is

fast ^^ettin^ underv^-y, with carlot shipncnts increasing weekly. Prices for
this year's near record- crop of peaches opened at or near ceilings, vrhlch are
slightly higher thaii last, year, "but nay decline tenporariHy after markets 'be-
cone well supplied. Prices for cherries on the Nevr York City and Chicago auo-
tion narkots opened considerably higher than a year ecarlier, when ceilings were
in force, "but declined in following weckf? to levels near bhose of last year*

TWJCK CHOPS

Prices for nost truck crops sold on the fresh narket this smrier are
expected to he noderately lower than a year earlier. Indications June 1 were
that total production would he ahout I/5 larger this sunner than last. Largest
increases in production over last smtner are indicated for cantaloups, green
peppers, onions, waternelons and celery.

The index of prices received hy farners for tnack crops (wbach reflects
prices received during the first half of eaxjh nonth) dropped sharply from 282
in April to 177 i". ^7', thus bringing the index woll below that of 193 ^"0^ ^'^7
a year earlier. The break in prices resulted fron the pressure of seasonally
increasing supplies of truck crops, deterioration of quality in sone areas
because of excessive rainfalij, heavj'" shlpnents fron the record-large early
connercial potato crop, and the disraption of shipping schedules arising fron
the railroad strike. In late I-Iay and early June, hov;over, jjrices for nost
truck crops recovered rapidly, though' renaining below last year's levels for
corresponding weeks.

Prices to growers for truck crops producbd for processing are expected
to average about as high this year as last. To enable canners to pack and
sell certain vegetables at civilian ceiling prices, on interin subsidy pro-
gran has been announcedj, covering that portion of the 19^6 pack produced prior
to July 1, 19^6. Decisions with respect to the subsidy progran for production
on and after July 1 will be nade after Congress has acted on the general qiies~
tion of continuing subsidies, Che iiiterin progran covers production for civ~
ilian sale of canned s\i?eet corn, green peas, green pea soup, tcnatoes, tonato
juice and other principal tonato products. The progran a,nd rates are substan-
tially the sane as in 19^5 •

POTATOES

In spite of a continued strong denand for food and the attention that
vdll be directed toward potatoes as a partial substitute for cereals, prices
received by farners for potatoes dtiring July and August are expected to stay
near support levels because of relatively- large supplies yet to be narketed
out of this yearns record-large crop of early connercial potatoes. At such
levels, growers would receive prices vhich would average about 10 percent
lower than prices actually received in corresponding nonths last year.

Governnent purchases of early potatoes for price-support purposes are
being nade at a record- high rate. Because of their inability to get grain,
distillers, v/ho ordijiarily would use grain as a nuch cheaper source of nate3>-
ial for alcohol nanufactuxe, are furnishing an outlet for nost of the potatoes
acquired by the Governnent under the priced-support progran^ Military and fo2>-
eign requirenents for dehydrated potatoes have fallen off to considerably
less than on ©-half the quantity dehydrated last yearc

The production 6f civilian vrool fabrics has shown ]Tiarked improvement so
far during ISkS. PaT^ric production for the first quarter of 19^6 was 15 percent
above the last quarter of 13^3 output of wool fa"bricB for the second quarter
is expected to "be slightly in excess of the first quarter. The increase in the
production of nen's wear fahric? in the first quarter was slightly larger than
the production of women's wear fahrics, CPA lias indicated that the scheduled
output of wool apparel fahrics in the second quarter shows a drift toward the
heavier fahrics and to a greater production of worsteds which are utilized for
men'sssuitsr With the high level of fa'bric output now attained there is a good
possihility that other production prohlens will "be solved so that a more "bal-
anced supply-demand relationship in wool apparel will "be reached by next year.

Total .mill conBsnption of apparel wool continued high in April, equiva-
lent to an annual rate of 1,100 million pounds, gree.se liasis* Apparel wool con-
sumption in I9U6 is likely to he close to a "billion pounds, a consumption much
higher than in any previous peacetime year. There has Taeen some further in-
crease in the consumption of domestic wool lately. Commodity Credit Corporation
sales to dealers and mills in April were over tvace as large as in ^arch, result-
ing in some decrease in Government stocks ever, though there v;ere large Govern-
ment purchases of mostly pulled wool. Imports of raw wool so far this year have
"been very large, hut they may he smaller during the mtt few months as this is in
between seasons for Southern Hemisphere countries.

- COTTON

The price for Middling 15/16-inch cotton at the 10 spot markets advanced
from an average of 27 •23 cents a pound in the last v:eek of May to a new hdgh
since the middle twenties of 2^.03 cents on June 10c The strength appears to he
due to (1) pending legislation dealing with the removal of price controls, (2)
the 50 point increase in the parity price of cotton from mid-April to mid-May,
(3) unfavorable reports on weather and crop conditions coning from the cotton
producing area, and (k) a reduction in domestic stocks resulting from high mill
consumption, export programs and last year's small crop.

Mill consumption for the crop year ending July 31 is now estimated at S*!
million hales, which compares with 9*6 actually consumed a year earlier. Cur-
rently, however, consuLiption is running above the annual estimate and, despite
the effects of the coal strike, mill consumption in iAfiril, May and June will av*
e rage well above the rate during the first eight months of the crop year.

Demand for Anerican-type cotton produced in Argentina, Brazil, and Mexico
has been expanding as countries formerly occupied by Axis forces and the Axis
nations themselves re-enter the world cotton market* As a result, prices of
this type of cotton have n.ade strong advances, but at the same time United
States prices also advanced. Consequently, the export payment program has been
continued with the cent payment unchanged until . further announcement.

TOBACCO

Auction markets for Maryland tolDacco, the only type of tol^acco "being
marketed in volume, opened on May 21. Between that date and June g ahout Ig
percent of the crop or 3,880 thousand pounds v.-ere sold at an averaf:e price
of 55.9s cents per pound, 0.6 cents a pound aoove the record high entalDlished
during the first two weeks of last season. The ahf?:Gnce of ceiling prices has
permitted advances in the prices of the "oetter grades Tjeyond those received
for corresponding grades a year earlier. On the other hand, prices for
the poorer grades hf-ve declined "below those of last year. Thus, price
differentials "between grades are widening compared with the narrow differential
which developed under price control.

On the opening day, "bid prices v/ere so much "below last year's level that
farmers withheld offerings to such an extent that certain of the auctions
vrere closed. . On succeeding: days, however, the reluctance of farmers to sell
at prices apprecia,"bly "below a year earlier forced price increases to levels
consistent with this season's supply of and demand for Maryland to"bacco. Sup-
plies of Maryland to"bacco this season are 10 percent "below tho^e of a year
earlier and export demand this season is a"bove that last year. Total domestic
demand for cigarettes, t'ne chief use of Maryland to"bacco, is dovm a little due
to decreased military/ takings "but is still near record levels.

EECMT DETELQPMEITTS 11^ U. S. P0Z3IG1T TRADE

Some important developments in the field of foreign trade have occurred
during the past few months# Lend-lease was terminated shortly after V~J Day,
and military shipments to United States forces ahroad "began to taper off. Some
wartime import and export controls have "been lifted "both here and a"broad. The '
Federal G-overnment ha.s "been withdrawing from the import purchasing field.
Foreign governments are considering turning the trade f^onctions of their p'or—
cha.sing missions over to private tradprs. Increasing UKHELA. exports of United
States merchandise a.nd rising commercia.l exrjorts ha.ve offset a large part of
the effects of the termination of lend-lease. Decreases in United Sta.tes
imports of war matterials since Y-J Day ha.ve "been more than replaced "by larger
purchases of peacetime goods.

United States foreign trade is of great importance to farmers. Most
important at the present time is the huge direct demand for American farm
products to help meet the world food emergency. This direct demand i«dll taper
off as foreign agricultural ]jroduction recovers, "but exports of n onagri cultural
products will "become increasingly important in the domestic demand situa.tion
for farm commoditios "by adding to "business activity and consumer incomes in the
United States.

Short-Time Out look for Export s Favoralsle

Foreign countries are greatly in need of food, clothing, housing, and
a vjiie range of industrial goods for industrial reequipment and expansion.
Because of its great productive capacity, the United States is expected to
supply a considerahTe part of these reouirement s, Fands for payment are now
"being provided in large -part "by UIOHIA, "by foreign "balances of gold and dollar
exchange accumulated in this coun^-ry dur ng the vp.r, and "by the extension of
credit. On July 3I1 lS'+5» "^^^e limit on outstanding loans and gua-.rantios of the
Export- Import Bank was raised from $700 million to $3.5 "billion.

JUKE I9U6

- 1^ -

"Sex-j loans, including loans to France totaling $1.2 "billion have "been negotiated,
and a part of the resources of the Bank are still tmcommitted.

Daring the war, exports of U. merchajidlsc rose to an all-time high
of more than $lU "billion in IShk, compared with a little over $3 "billion in I93S.
Most of the wartime increase in exports was accounted for "by lend-lease v/hich
hegan in igUl. Of total exports in 19^4,; nearly $11,300 million or ahout SO
percent were lend-lease, of >rhich $1,600 million were agricultural commodities,
and $9 1^75 million were n onagri cult ^Jiral produ.cts. Exports dropped sharply
vdth the termination of lend~lcpre in 19^5* From $1,119 million in the month
of V-B Day (May), total exports declined to ^kkl million in Octo"b3r. Since
then the trend in monthly exports has "been upward due "both to larger commercial
exports and to a partial replacement of lend-lease "by UNRRA shipments. In
April I9U6, total exports were valued at $739 million, more than 3 times the
a.vera^e monthly va.lue in the years 1935~3S» Commercipl exports, since they
exclude UlTERA and lend-lease,-^ show a somewhat smaller rise. Exports of
United States merchandise "by "UNKRA rose from $5«1 million in the first quarter
of' I9H5 to $19^ million in the fourth quarter, and are estimated to have exceeded
$300 million in the first quarter of this year.

Owing to a. higher level of prices, the increase in quantities has heen
less than the figures for value of exports indicatcc Even so, the index of the
quantity of exports in January arid Pe"brua,ry (the most recent months ava,ila.'ble)
averaged twice as high as in the prewar period.

Longer- Time Outlook for Exports De-pendent Upon Imports . , .

Prospects for eyports of United States merchandise are not necessarily
so favorahle from a long-time as from a short-time point of view„ Basically,
there are only a few v/ays "by which foreign "buyers may finar^ce imports from the
United States. One of these is through the use of existing holdings of gold
a^nd dollar exchange. It is reported that on Decemher 31 1 19^5 such gold and
exchange holdings v/ere in excess of $20 "billion as compared with $15 hillion at
the end of 193^; hut this is hardly proportionate to the rise in prices. Fur-
thermore, several of the countries most important in international trade and
as purchasers of United States products in normal tiaies had their resources of
gold and dollar exchange greatly depleted during the war. Secondly, foreign
countries could ship to the United States most of their current production of
new gold. But such sliipments would not "be sufficient to sustain a large volume
of trade and, furthermore, v/ould be economically undesirahle from the standpoint
of the United States because we would he giving up commodities in exchange for
the gold. Another method "by which foreigners may obtain dollar exchange is
through the extension of loans hy the United States. During the next few years,
while foreign countries are restoring and expanding their productive capacity,
loans from, the United States will play an im/portant part in enabling foreign
purchase of commodities from this country. Hov/ever, if loans are not to hecome
gifts, interest end ajnortization payments will rise relative to new loans and
presuma,hly sooner or Iciter surpass the value of new loans

1/ Export goods contracted for prior to termination of lend-lease are still
officially classified as lend-lease exports. However, these are really commer-
cial exports in the sense that they either are being paid for in cash or are
being financed "by Export-Import Bank loans.

JUl'IE I9U6

- 15 -

This means, of course, that in the lon^ run foreign countries must obtain
the dollar exchange necessary to purchase exports of the United States and repay
loans extended by the United States from the sale of merchandise and services to
tnis country. Conceiuently , if the exports of the United States are to con-
tinue to ^rov7, its imports must show an even p;reater expansion. Before the v/ar ,
foreign countries obtained considerable dollar exch-ange from the net sale of
shipping services to the United States, the expenditures of American tourists,
immigrant remittances, and other invisible items. Expenditures of American
tourists probably will be larger than before the v/ar and the other items will
reappear to some extent but the total will be small as compared with United
States merchandise imports. . ..

Table 1.- United States exports of U. S. merchandise, prewar, war
period . and postwar monthly comparisons

Exports-Value = ^^^^^^

Period and month

Prewar period

1935-35 aionthly average . .

War Toeriod

I9I+O monthly average .
19^1 monthly average .
I9I+2 monthly avera^re .
19^3 monthly average .
lyhh monthly avern,ge .
19^5 Jan. -Aug. average

V/ar period monthly average

Postwar months

Lend-

1 ease

UEBRk ' ether ' Total

Mil.
del.

Mil.
dol.

quantity of
tota,l exports
193^.-39=100

Mil.
dol.

Mil,
dol,

0

0

236

236

100

0

0 ,

328

32g

13^

60

0

ys

Ulg

160

Uii

0

256

667

209

862

0 •

208

1,070

305

9U1

0

230

1,180

295

627

lU

27"^

235

2

275

755

222

19^5 September

u

156

35

309

5 CO

2U5

October .

■ 1/

7.''

^6

333

UUl

125

ilov ember

: 1/

Ill

73

' U28

612

173

December

: 1/

186

86

■• I+U3

715

206

I9U6 January .

= 1/

127

123

•526

780

223

Feb ruary

= ly

98

85

U5-5

651

183

March . . .

: 1/

115

97

■■ • 5'6'9

788

April . . .

: 1/

79

87

• • 572

739

Averafre of S

postwar

months

lis

78

• h^h

6^2

1/ All lend-lease

exports

after

Auni:

~.t 20,

19U5 h

ave ber:

i yCiid. for

in ca

being financed by

Export-

Import

Bank

loans

under

Section

3c of the

Lend-]

Act.

Imports Rising, but Hampered by V/ar' s Aftermath • • , • •

The impact of the war on imports was quite different from that on ex-
ports. Eaw m.aterials having a high priority for war production v/ere given
right of way, but imports of many commodities were reduced either by the ship-
ping shortage or beceixse of the cutting off of sources of supply.. As a result,
total imports showed a much smaller increase during the v/ar than e3<2;orts.
Since "V-J Day, imports have increased moderately, and in April. wp;re valued at
$393 million compared with a monthly averare- of $27^ million from January" 19^0
through August 19^5, a^d $195 million in the period '1935-39- prewar prices,

import quantities since ■"V-J Day have averaged only a little above the prev/ar
level.

JUNE 1946

- 16 -

A number of factors aro delaying the gro-vvth of ir.iport.T. In the fornor
enemy or oneny-occupiod r.roas, producticn capacity is li.rdted by shortages of raw
naterials and industrial equipnent and danage to transportation, conr.unication and
harbor facilitiesc In sono countries, exchange restrictions are interfering v\rith
sales to the United States. In these areas ^ prices have risen nuch nore than in
this country, and vrithout exchange»-r*ate adjustnents it is not pocsible for their
products to be-inportod into the United States and sold under existing price coil-'
ings» However^ present levels of United States inportr.; aro nrialA in rolation to
prevailing levels of industrial activity and omsunor buying power, and irports
should increase considerably as the above -nentioned obstacles are overcone*

During the v/ar the value of inports fron Canada, other Western Henisphere
countries, Oceania, and Africa, increased sharply while inports fron Europe and
Asia decreased narkedly* Inserts of specialized nanufactures fron Europe and
inports of rubber, tr'n^ oilseeds, and other foodstuffs and raw naterials fron Asia
have increased in recent nonths and should rise further as these areas rover't to a
poacetine basis*

In the long run, the nost ir.iportant factors v;hiGh would operate to cnco\irago
United States inports arc a high level of ocononic activity in the United States,
oxpandod productive capacity in foreign countries, and reduced \vorld trade barriers,
including the trade barriers of the United States, If the British loan agreement
becones law and the world Monetary Fund and World Baxik oporate successfully, a
trend tovrard a larger volune of international trade will be encouraged.

Table 2e- United States inports for consunption, prewar, war period, and
_____ postv/ar nonthly conparisons

Value

Period and no nth

Agricul-
tural
inports

Prev/ar period

1935-39 nonthly average ••:

:

War period :

Million
dollars

99,4

Non-
agricul-
tural
inports

lETTion"
dollar s

95,6

Total
inpcrts

Million

Qi;antity indices
Agricul

tural in-
ports,

1935-39 =
100

Total
inports,
1935-39 ■
100

1940 nonthly average « •

1 • • e 3

107

105

1941 nonthly average • .

1 * • • s

139

129

1942 nonthly average » .

r • 0 » *

106

125

1943 nonthly average • ,

< • • • !

126

157

1944 nonthly average «i

1 . 0 . :

151

172

1945 Jan, -Aug average

• » n 5"

150

201

War ;period nonthly average;

129

145

Postwar notiths :

1945 September j

October ,3,

Eovenber ,.••,«:
Decenber ••4, •*•••, ,9:

1946 January •«■•«••••••..;

February •••,••••«•«•;

March Ae,*,,,*-,**.*,*:
Apr il •••,.,,0. :

Average of 7 postwar nonthsi 149

141

139
121
109
193
149
190

188
205
192
171
206
157
183

dollars

Percent

Percent

195,0

100

100

212

107

101

268

129

120

231 •

77

90

282

82

100

323

88

109

351

85

114

274

95

105

329

91

107

344

87

111

313

75

•101

280

64

189

400

92

125

307

77

96

373

89

393

335

82